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Spokane gas cheapest in the state

Richard Roesler
Staff writer
April 18, 2008

Gas prices continue to rise in Spokane, Wash. Thursday April 17, 2008 but recent studies have shown gas is cheaper in Eastern Washington than the West side of the State. (Christopher Anderson / The Spokesman-Review) More from Washington's capitol: Eye on Olympia blog

OLYMPIA _ Paying a lot for gas, Spokane? You bet.

But nearly everyone else in Washington is paying more.

That was among the findings Thursday of a year-long investigation into fuel prices. State investigators found no evidence of price-fixing or illegal collusion in Washington, although gas prices have risen 230 percent since 2003.

“This week we are paying the highest prices in the history of the state,” said Attorney General Rob McKenna.

The high cost, Thursday’s report said, is largely due to:

•The price of crude oil, which has recently been reaching all-time highs of well over $110 a barrel. Demand from places like China and India is surging, and the weak dollar doesn’t help. Crude oil accounts for nearly two-thirds of the price of a gallon of gasoline, the state investigation found.

•Rising refining costs, particularly for cleaner diesel fuel.

•Washington’s highest-in-the-nation gas tax, which totals more than 54 cents a gallon.

•And supply constraints. West Coast refineries don’t make enough gasoline to slake the region’s thirst, meaning that the gasoline in Washingonians’ tanks was sometimes refined as far away as South Korea and Finland.

Unlike electricity, natural gas and even municipal drinking water, gasoline and diesel aren’t a state-regulated commodity. Companies are free to charge what they can get, and refineries are free to sell their product to top-dollar bidders.

That means that while Washington’s five refineries actually churn out more than enough fuel to supply the state, a significant amount goes to motorists in Oregon and California.

University of Washington economist Keith Leffler, a petroleum market expert who helped compile the data, said he was surprised by the Spokane data.

The last state gas-prices report, written in 1991, found that pump prices for gas tended to be lower in Seattle than in Eastern Washington. Not any more. In recent years, places like Bellingham, Bellevue and Port Angeles paid the most. On average, the cheapest place in the state to buy gas last year: Spokane County.

“Spokane prices were approximately 7 cents below the state average in 2007,” the report found.

Part of the reason, Leffler said, is that unlike Seattle, Spokane gas stations have several sources of fuel. Puget Sound refineries can send their fuel to Portland, then barge it to Pasco and pipe it to Spokane. Or Utah refineries can pipe fuel to Pasco and then north. Most of Spokane’s gas is piped in from Montana refineries.

Even so, Leffler suspects there’s another factor also at work: the nearby border with Idaho. Of the five counties with lowest gas prices last year, three bordered Idaho.

“Spokane borders Idaho; Idaho has very low gasoline taxes,” he said. So local retailers are forced to keep prices low.

On Thursday, according to AAA, Spokane had the second-lowest average gas price in the state, after Vancouver. In places like Stevens and Ferry counties, on the other hand, the data indicates that gas prices last year averaged 9 cents to 16 cents a gallon higher than in Spokane.

Leffler said the opposite border effect seems to be playing out in Bellingham. Visiting Canadians, basking in their stronger currency and facing much-higher fuel prices at home, are eager to fill their tanks there. So are penny-pinching Americans heading into Canada.

The bad news, both locally and statewide, is for folks who use diesel. Spokane, Yakima and Bremerton all tend to have higher-than-average diesel prices, the report found.

And both demand and price for the critical trucking fuel have been surging. Demand has risen 31 percent in four years in Washington, primarily due to more semi-truck traffic at the ports of Seattle and Tacoma.

As for price: A gallon of diesel cost $2.90 here a year ago. On Thursday, according to AAA, Bellingham stations were charging $4.39. In Spokane, it averaged $4.33. Economists have long warned that higher diesel costs mean higher prices on nearly everything, including food.

There was a little good news Thursday about gasoline, however. The environmental advocacy group Sightline said Thursday that per-capita gas consumption in the Pacific Northwest has dropped 11 percent since 1999. That’s like parking every Washington car for 5 weeks.

“It’s something that’s gone almost completely unnoticed” because it was mostly offset by the region’s growing population, said the Seattle-based group’s research director, Clark Williams-Derry. He says mass-transit usage is increasing, hybrid cars are selling well, and he speculates that families with multiple cars are using the efficient ones more.

“We are starting to make choices that help protect ourselves from the rising cost,” he said.

If gas prices remain high, Leffler said, expect more of that. Consumer behavior is slow to react to gas-price spikes, he said, because most folks can’t immediately buy a less-thirsty car or move closer to work.

“In some sense we need this sword, this stab in the side, to change our behavior,” he said. He cited auto makers’ growing emphasis on better mileage cars. “But it takes time.”

The key question, of course, is what does the future hold? In 2004, gas averaged only about $1.50 a gallon. On Thursday, according to AAA, it was nearly $3.60.

Leffler said he doesn’t think the current high price of crude is sustainable. But he said it’s impossible to say for sure.

“If I knew the answer to that,” he said, “I would be a much wealthier man than I am.”

- Richard Roesler can be reached at (360) 664-2598 or by email at richr@spokesman.com

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